The recent entry of Morgan Stanley into the US spot bitcoin ETF market has been seen by some as a catalyst to end the current crypto bear market, given the vast distribution power of the company's $8 trillion wealth management network. However, Blockstream CEO Adam Back has cautioned that the process is slower than anticipated. Back, an early contributor to the Bitcoin community, believes that while bitcoin ETFs are a significant development, institutional adoption takes time.
"I think what people may have miscalculated is that institutional adoption is very slow," he stated in an interview. He noted that even when large institutions like BlackRock recommend a 2-4% allocation to bitcoin, the actual implementation by fund managers can take a considerable amount of time, potentially up to a year or 18 months. Back emphasized that the build-up of institutional investment is a gradual process, but it will eventually create a positive tailwind for the market.
The CEO also discussed the impact of regulatory changes and the role of governments in shaping the crypto industry. He pointed out that the current US presidency has created a more favorable environment for crypto, but the establishment of bitcoin ETFs has the potential to transcend administrations and ensure a more stable regulatory framework. Furthermore, Back touched on the cyclical nature of bitcoin's price, driven by the quadrennial halving event, and the potential for a price slide due to market expectations. However, he believes that institutional flows, such as those from ETFs and sovereign wealth funds, will eventually overwhelm the sellers and drive the market forward.
Additionally, Back addressed concerns about quantum computing's potential to break Bitcoin's cryptography, stating that while it is a factor, it is often overstated and subject to information asymmetry. Institutions, being more systematic about risk, will consider such tail risks and plan accordingly.